STATE OF GUJARAT AND ORS. versus SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES

Citation: [2003] 1 S.C.R. 695 · Decided: 29-01-2003 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

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STATE OF GUJARAT AND ORS. 
A 
v. 
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES 
JANUARY 29, 2003 
B 
[M.B. SHAH AND ARUN KUMAR, JJ.] 
Bombay Electricity Duty Act, 1958-Section 3(2)(vii)(b) and clause (ii)(c} 
of Explanation I to Section 3-Exemption from levy of electricity duty-
Entitlement of-Held: For claiming exemption the unit should be a new C 
industrial unit-Further it should not be expansion of existing business or 
undertaking-On facts new unit set up not totally independent of the assets of 
the existing unit, thus not entitled to claim exemption from levy of electricity 
duty-Hence order of High Court granting exemption set aside. 
Words and Phrases: 
'New Industrial Undertaking '-Meaning of in the context of Section 
3(2)(vii}(b} of the Bombay Electricity Duty Act, 1958. 
'Expansion '-Meaning of in the context of Explanation I clause (ii)(c) 
D 
of section 3(2)(vii)(b) of the Bombay Electricity Duty Act, 1958. 
E 
Respondent company is manufacturer of portland cement. It 
installed a new kiln in a new building erected within the same premises 
and made use of existing idle capacity of crushers, cranes, packing 
machines, coal and raw mills. It filed an application for obtaining eligibility 
certificate for exemption from levy of electricity duty. Authorities under F 
the Act rejected the application. However, High Court allowed th·e petition. 
Hence the present appeal. 
Appellant contended that existing plant and machinery are used in 
the process of manufacture of cement in the so called new industrial unit G 
which is expansion of the existing business or undertaking and in view of 
the restrictive definition of a 'new industrial undertaking' contained in 
clause (ii)(c) of Explanation I of Section 3(2)(viii)(b) of the Bombay 
Electricity Duty Act, 1958, respondent is not entitled to exemption. 
Respondent contended that use of existing plant and machinery in H 
695 
696 
SUPREME COURT REPORTS [2003) I s.c.R: 
A the new unit was only incidental and actually it is a case of setting up of 
a new industrial undertaking which entitles respondent to exemption ... 
from duty. 
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Allowing the appeal, the Court 
B 
·HELD: 1. A 'new industrial undertaking' under sub-clause (ii)(c) of 
Explanation I of Section 3(2)(viii)(b) of the Bombay Electricity Duty Act, 
)'-- · 
1958 will only qualify for the exemption from levy of electricity duty.- In 
view of sub-clause, cases of expansion of existing units, irrespective of 
extent of expansion, will not qualify for being called a new industrial 
C undertaking within the Act, to be entitled for th«; benefit of exemption 
from levy of electricity duty as a 'new industrial undertaking'. The 
expansion may be substantial but that would not make any difference. 
1700-E, F, G) 
1.2. In the instant case, respondent is admittedly using its existing 
D crushers, cranes, raw mills, packing machines and old cement mills to 
complete the process of manufacture of cement in the new unit. The so 
called new unit/undertaking is not totally independent of the assets of the 
existing unit and cannot do without the assets of the existing unit to 
complete the process of manufacture of cement on its own as a viable 
unit. New unit is dependent on the existing assets. A physical identity 
E with the old is preserved. 1700-F; 702-E, F) 
1.3. Meaning of word 'expansion' "to become greater or bigger in 
size, to spread out" is to be applied to the facts of the instant case. 
Respondent company initially had a production capacity of 660 metric 
tones which was subsequently increased to 1000 metric tonnes, then by 
F setting up the alleged new unit, production capacity of the company is 
more than double. But this unit is not self contained and is not an 
independently viable unit. Further respondent was having two kilns and 
third is added. This leads to the inevitable conclusion that the new unit is 
an expansion of an existing undertaking in the State. Once it is held to be 
G a case of expansion, the claim for exemption from electricity duty, set up 
by respondent, completely falls to the ground and thus, the respondent is 
not entitled to exemption from electricity duty. Hence the order of High 
Court is set aside. 1702-H; 703-B-D) 
Textiles Machinery C01poratio11 ltd., Calcutta v. Commissioner of Income 
H Tax, West Bengal, 119771 2 sec 368, relied on. 
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STATEOFGUJARATI'. SAURASHTRA CEMENT ANDCHEML INDUS [ARUN KUMAR,J.] 697 
Bajaj Tempo Ltd., Bombay v. Commissioner of fncome

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